Share Market Knowledge: Most people incur losses after buying shares in the stock market and complain that the stock they buy falls. Since, investment in the stock market is subject to market risks, anything is possible here. In such a situation, it is very important to apply 'stop loss' to avoid financial loss. Now the question is what is stoploss? Perhaps many people may not know about it. Surprisingly, those who know about stoploss do not follow it.

In a risky market like the stock market, stop loss is a surefire way to avoid losses. Let us tell you how you can avoid big losses through stop loss.

What is stoploss?

There are both profits and losses in the stock market, so every sensible investor should decide the limit of profit as well as loss after buying shares. Stoploss is a method used by investors to limit losses, in which shares are sold in case of loss up to a certain limit.

Understand with Example

Suppose, you bought 1000 shares of ABC company for Rs 300. In this case, you invested Rs 3 lakh in the shares. Do you think that this share will go up to Rs 350? If this happens, you will get a profit of Rs 50,000. Here you have fixed the target and thought about the profit. But, if the share starts going below Rs 300, then you will incur a loss. In this situation, you will have to put a stop loss, that is, you will have to fix a level that if the share comes to Rs 280, then I will sell it and leave. In such a situation, you will have to bear a loss of Rs 20,000.

By placing a stop loss in the system, if the stock goes below the set level, the stop loss will be hit, meaning your shares will be sold. Even if there is a loss, you will be saved from a big loss. Big investors always strictly follow the stop-loss rule.